What trash can tell us about the U.S. economy

What fascinating secrets are buried in our garbage? Perhaps an indication of how well the economy is doing.

Over at Marketplace, Kai Ryssdal offers up this fascinating graph from economist Michael McDonough. It shows that U.S. GDP growth has long been tightly correlated with the change in carloads of trash that are being shipped off by rail to landfills across the country:

In fact, the trash index has had an 82.4 percent statistical correlation with U.S. economic growth since 2001. Few indicators are quite so revealing. As McDonough explains to Marketplace, trash provides a broad-based indicator of economic activity: "It's holistic because it's not isolated to a single part of the economy. It's people throwing things out, it's buildings being demolished — it's everything. ... I mean, if you're going to build a new building, there might be a building that's already there. If you buy a couch, you might be throwing out an old couch. If you go out to McDonald's and you buy something, you're going to throw something out."

And that's worrisome because, as the graph above shows, the garbage indicator (which is gleaned from statistics provided by the American Association of Railroads) appears to have plummeted for the third quarter of 2012. That could be a sign that the U.S. economy is heading for a rough patch, dragged down by the recent slumps in both Europe and China.

Then again, as a wild alternative hypothesis, this might just be a sign that U.S. economic activity has somehow become decoupled from garbage of late. In a recent issue of New Scientist, Fred Pearce discussed the possibility that the rich world might soon be reaching a point of "peak stuff," in which economic prosperity is no longer so firmly linked to the amount of energy and raw materials we use—and, in turn, waste. But it would be odd if the historically tight connection between growth and trash became disconnected in just a few short months. So perhaps this chart really is an ominous indicator...